Education in India

Section 25 companies to be allowed to invest in higher education in India

According to a Business Standard report,

Private and foreign corporate investment may soon get to flow into Indian higher education with the government considering a move to reform policy that hinders such financing.

Currently, it is not possible for non-profit companies under Article 25 of the Companies Registration Act — like industry associations — to set up an institution and get university status and recognition from the University Grants Commission.

Educational institutions in India can be set up only by trusts, societies and charitable companies, but the profits cannot be taken out of the institution and have to be reinvested. Not only does this restriction hamper expansion, it also encourages promoters to resort to creative accounting to take out profits from the institutions.

Now, under encouragement from an influential political ally from Maharashtra, the United Progressive Alliance government is expected to clarify this clause, sources told Business Standard.

But this report doesn't indicate that for-profit higher education will be allowed - it only seems to indicate that in addition to non-profit trusts or societies, non-profit Section 25 companies will also be allowed to set up higher education institutions, which is not as big a step as what is being considered in the primary education space. A recent report had suggested that for-profit investment in primary education is under consideration.

So, what is a Section 25 company? The Indian Companies Act (1956), provides a definition of a section 25 company.

Section 25 POWER TO DISPENSE WITH "LIMITED" IN NAME OF CHARITABLE OR OTHER COMPANY.

(1) Where it is proved to the satisfaction of the Central Government that an association
(a) is about to be formed as a limited company for promoting commerce, art, science, religion, charity or any other useful object, and
(b) intends to apply its profits, if any, or other income in promoting its objects, and to prohibit the payment of any dividend to its members, the Central Government may, by licence direct, that the association may be registered as a company with limited liability, without the addition to its name of the word "Limited" or the words "Private Limited".

(2) The association may thereupon be registered accordingly; and on registration shall enjoy all the privileges, and (subject to the provisions of this section) be subject to all the obligations, of limited companies.

(3) Where it is proved to the satisfaction of the Central Government - (a) that the objects of a company registered under this Act as a limited company are restricted to those specified in clause (a) of sub-section (1), and (b) that by its constitution the company is required to apply its profits, if any, or other income in promoting its objects and is prohibited from paying any dividend to its members, the Central Government may, by licence, authorise the company by a special resolution to change its name, including or consisting of the omission of the word "Limited" or the words "Private Limited"; and section 23 shall apply to a change of name under this sub-section as it applies to a change of name under section 21.

(4) A firm may be a member of any association or company licensed under this section, but on the dissolution of the firm, its membership of the association or company shall cease.

(5) A licence may be granted by the Central Government under this section on such conditions and subject to such regulations as it thinks fit, and those conditions and regulations shall be binding on the body to which the licence is granted, and where the grant is under sub-section (1), shall, if the Central Government so directs, be inserted in the memorandum, or in the articles, or partly in the one and partly in the other.

(6) It shall not be necessary for a body to which a licence is so granted to use the word "Limited" or the words "Private Limited" as any part of its name and, unless its articles otherwise provide, such body shall, if the Central Government by general or special order so directs and to the extent specified in the directions, be exempt from such of the provisions of this Act as may be specified therein.

(7) The licence may at any time be revoked by the Central Government, and upon revocation,

Not that big a difference from the way non-profit trusts or societies operate in India.

The Business Standard report also goes on to suggest that with the shackles of the Left Parties removed after the recent confidence vote, there will now be movement on the pending Foreign Education Providers (Regulation) Bill to allow foreign universities to operate in India.

There is also renewed hope for a Bill allowing foreign universities and institutions into India to be tabled in Parliament, judging by Human Resources Development Minister Arjun Singh’s remarks at a conference of state education ministers two days ago.

The Left parties were the principal opponents of the Foreign Education Providers (Regulation) Bill, which was cleared by the Cabinet in 2007 but never introduced in the Lok Sabha although it was listed in the agenda papers.

“We have tried to accommodate some of the concerns. We will try to introduce the Bill in the Lok Sabha session beginning August,” Singh said. The Bill seeks to regulate foreign institutions setting up campuses in India. A contentious issue is whether caste-based reservations would apply to these institutions.

Both Oxford and Stanford Universities have evinced interest in setting up campuses in India but have been hesitant about moving forward until they are clear about the degree of regulation, funding and other issues.

Experts say the moves would provide clarity on funding of higher education institutions by overseas entities. "This will probably provide funding clarity for foreign institutions like charitable organisations or NRIs wanting to set up facilities in India.

International higher education headed for a sub-prime style crash?

So says Philip Altbach, in an article in The Times Higher Education.

Just as many universities want to be global players, so in the housing sector, buyers and financial industries wanted to participate in a growing and lucrative market. House prices were rising fast, and few questions were asked about products, sellers or buyers. The market was allowed to function without constraint. "Irrational exuberance" set in, with the market becoming saturated - a "bubble" mentality. The bubble has now burst and many countries face very serious economic and social consequences.

International higher education stands in the middle of that cycle - somewhere between exuberance and a bubble - so now is the time to examine which actions are sustainable, which policies will serve the interests of students and the academy, and which actions constitute mistaken policy or greed.

International education has become big business, with perhaps 3 million students studying outside their own countries, and billions of pounds, euros and dollars being generated from tuition, living expenses, branch campuses, franchises and much else. No one knows how many branch campuses exist, but estimates are in the hundreds, almost all in developing or middle-income countries. The market is large, growing and basically unregulated. It is indeed the Wild West or, more accurately, the Wild East.

One might take the view that "the market will sort itself out". Here again, a comparison can be made with sub-prime mortgages. In that sector, today's crisis was reached by allowing unscrupulous players to operate, and by encouraging respectable banks to buy up risky debt with little regulation. There is a similar mentality in international higher education. In this largely unregulated market, some sellers are prestigious universities hoping to build links overseas, recruit top students to their home campuses and strengthen their brand abroad. But many more are sub-prime institutions: sleazy recruiters, degree packagers, low-end private institutions seeking to stave off bankruptcy through the export market and even a few respectable universities forced by government funding cutbacks to raise cash elsewhere.

Buyers such as students but also institutions in developing countries, are similarly unregulated, sometimes ill-informed and often naive. Most tragically, students buy services without much information or understanding. Uninformed or simply avaricious institutions in developing countries may form partnerships with low-quality colleges and universities in, for example, the US, Australia and the UK, and receive substandard teaching or degree courses. Regulation may be absent or inappropriate, making quality assurance impossible. There are not enough top-quality universities in countries such as China and India to absorb all the potential overseas partners. Further, most institutions worldwide lack the infrastructures to engage successfully in sophisticated international initiatives.

I couldn't agree more with his suggestion and his proposed solution to avoid the impending crash.

Clear regulation is needed, probably by government authority, to ensure that national interests are served and that students do not receive a shoddy service from unscrupulous providers. This will also help universities think about their motivations for entering the market.

We badly need an effective educational regulator in India like SEBI, the RBI or TRAI, which regulate the capital markets, the banking sector and the telecom sector respectively. Will the Independent Regulatory Authority for Higher Education (IRAHE) see the light of day and more importantly have the teeth and comptence to regulate well, if it does indeed come about?

Babson College, USA to help Pearl Global set up Pearl School for Business Studies in Delhi

Pearl Global, which set up the Pearl Academy of Fashion, has tied up with Babson College, USA to set up a school of business and entrepreneurship in Delhi. The press release (May 05, 2006) has more details.

Babson's provost explains the rationale behind Babson's interest in this partnership with Pearl in a podcast and says there is no strategic intent at this time and that they are only doing it "to help entrepreneurship for the love of the game," as part of their attempt to help small schools with no reputation in starting up entrepreneurship programmes.

Babson has similar relationships in Thailand with Bangkok University, which is looking to start a school of entrepeneruship. Babson is also working with two groups in Japan and exploring possibilities with an Australian university to locate a school of entrepeneurship in Singapore and are also talking to a school in Equador in South America. Babson is looking to develop a consulting relationship, extend the brand and learn more about those countries and bring that back to the Babson curriculum.

Since this is not a full-fledged investment in setting up the institute in India, this presumably won't fall under the category of foreign universities in India.

India may remove education from WTO offer

Indian Express (Feb 04, 2006) reports on a move by the Ministry of HRD to reverse India's decision on allowing foreign universities free entry into India by asking the Ministry of Commerce to remove education from India's offer to WTO.

Reversing its earlier decision, India plans to withdraw from its list of offers to the World Trade Organisation a provision that would have allowed foreign universities free entry into the country. The Union Commerce Ministry is to take the revised proposal to the Cabinet Committee on WTO to rescind the list approved of last July. It was after the July approval that the Indian delegation informally extended a commitment to the WTO whereby foreign educators would gain entry to India with the sole condition being that their fees would be fixed by the government or its agency, so that their entry did not lead to profiteering. However, no formal offer had been made and the talks are still to be concluded , said sources.

The ministry (of HRD) said that there was no need to make a hurried offer when others were dragging their feet. The only nations pushing for liberalisation in this area were education exporters like the US, the UK, Australia and Canada—none of which expect any outsiders to make incursions into their turf. The ministry (of HRD) also suggested that the country adopt a "cautious approach" considering that other countries in the Third World and among Muslim nations as well had told the WTO that they would not open their education sector as doing so would affect local political and cultural sensitivities.

The withdrawal of the offer would now mean a limited entry for the foreign educational institutions, with the government enacting a bill to regulate their entry, operations, as well as their fees.

CNR Rao Committee submits its report on entry of foreign universities into India

The CNR Rao Committee set up to advise the Government on the entry of foreign universities into India submitted its report a couple of months ago. I have not been able to find a copy of the report online as yet. But the papers have published the main highlights of the report as well as some reactions.

Urmi Goswami writing in The Economic Times (July 27, 2005) says,

For foreign universities, the days of easy entry into India may soon be over. The government is expected to be considering a proposal to set up a two-phase approval system for foreign universities. It will require foreign universities to get approval prior to setting up Indian operations.

In the first phase, foreign universities will be given a limited period trial, a sort of probation period. On the basis of performance in the trial period, these universities will be allowed to set up long-term operations. The proposed system will apply to all modes of operation — franchisee agreements, twinning programmes, study centres, programme collaborations, and offshore or branch campuses.

The proposal also calls for strong disincentives, such as forfeiture of substantial security deposits. This has been suggested to ensure that foreign players and their partners do not discontinue their operations after a few years, leaving students in the lurch.

A short-term approval will be extended to those varsities that are accredited in their country of origin. The institution will be expected to submit the latest audit report of the accreditation agency. To avoid a licence permit raj-type scenario, it has been suggested the system be made transparent and quick.

The recommendation has been put forth by the CNR Rao Committee, set up by the ministry of HRD in January. It indicated that the government was moving towards a regulatory regime that would permit foreign varsities to set up shop in India in light of GATS. Following the committee’s recommendations, the ministry had indicated that it would prepare a draft proposal before moving towards Central legislation.

Other members of the CNR Rao committee included professors

• HP Dixit, Vice Chancellor, Indira Gandhi Open University,
  
• Bakul Dholakia, Director, IIM Ahmedabad,
  
• Ashok Misra, Director IIT Bombay,
  
• Moolchand Sharma, Director of National School of Law University, Bhopal,
  
• CP Chandrashekhar, Jawaharlal Nehru University and
  
• Dr Atindra Sen, Registrar of the University of Delhi.

Nandini Iyer writing in The Hindustan Times (Aug 7, 2005) suggests that the Government might accept the report in full and also lists some of the foreign universities that have shown interest in setting up shop in India.

The CNR Rao committee on entry of foreign universities has several rules in mind for any comers. No poaching faculty from Indian colleges. No sending profits back home to parent institutions abroad. No franchising or offshore study campuses.

The committee also suggests that preferably only foreign universities from countries that offer Indian universities a business opportunity abroad should be allowed in.

The report suggests that the government lets in FEPs only after creating "a suitable regulatory and monitoring mechanism at the national level". The draft bill wants FEPs registered as deemed universities under the University Grants Commission (UGC), which reports to the Union HRD Ministry.

Government sources say it is likely that the recommendations of the Rao Committee will be accepted in full. It is expected to provide a "substantial security deposit against fly-by-night operators".

Approval to FEPs will be for a limited trial period, and will be extended depending upon performance. The committee suggests that such institutions should not be allowed to repatriate surpluses. It also wants the government to discourage franchising and off shore study centers, and opt for only twinning programmes with existing Indian universities.

In the past year, Yale, Stanford and Georgia Institute of Technology have evinced interest in coming to India. That interest may wane now. Yale wanted partnerships in select areas without grassroots involvement. Stanford was looking for a greenfield campus and also willing to look at an off-shore campus. Georgia Tech was looking for a green field campus.

Swaraj Thapa, writing in The Financial Express (Aug 24, 2005) reports that the Prime Minister is likely to refer the report to a panel of ministers who will decide on accepting the report.

A high-powered ministerial panel is on the cards to decide on the entry of foreign universities into India in the light of stringent recommendations made by an expert committee headed by noted scientist CNR Rao. According to government sources, Prime Minister Manmohan Singh was likely to refer the matter to a group of ministers once the proposal was placed before the Cabinet by the HRD ministry. India has to open the education sector as part of its international commitment on the General agreement on Trade in Services (GATS).

The sources said universities like Yale and Stanford have shown interest in establishing greenfield campuses in India. The government’s task, however, has been complicated with the Rao committee specifying tough norms for foreign universities wanting to open shop here.

Among the recommendations made by the panel include disallowing a significant part of the profits to be taken out of the country by foreign education providers as well as proposing a substantial security deposit as a safety measure against fly by night operators. The committee has also suggested that those universities offering some form of joint ventures including business opportunities should be entertained. The government is also against franchising and offshore study centres, a lesson learnt from the controversy in Chattisgarh.

Nirvikar Singh, professor at the University of California, Santa Cruz writing in The Financial Express (Sep 08 2005) expresses disappointment at the recommendations of the CNR Rao Committee in its report.

There is no shortage of managerial talent in India—much of it is being exported. The big constraint is human capital. Currently, government jobs in India (except for the elite services and the armed forces) rarely provide opportunities for developing productive human capital. Software and BPO have shown what can be done by industry-led training.

However, there is a tremendous supply bottleneck in India’s higher education. The government’s traditional response seems to be based on the assumption that private sector incompetence or malfeasance mirrors its own. Thus, for example, private and foreign investment in higher education, which would generate jobs by both, expanding education and by raising the productivity of entrants to the workforce, are government-constrained in ways that make no sense. In this respect, the recent CNR Rao committee report on foreign entry in higher education is a grave disappointment.

So, critics who note the shortcomings of economic reform on job generation are half right. But the answer is not in backtracking or hand-wringing, but more reform, in labour laws and in education. A complementary process is needed for job growth in agriculture and rural India (see the comprehensive 2002 ILO study of K Sundaram and Suresh Tendulkar). But creating more organised private sector jobs, good ones that are productive and human-capital enhancing, is both imperative and feasible through intelligent reform.

AICTE announces new regulations for foreign universities in India

AICTE has published a notification (dated May 16, 2005) on its web site annoucing revised regulations for the entry and operation of foreign universities/institutions imparting technical education in India. But the notification ends with a statement saying "The Regulations shall be subject to suitable review in the light of the recommendations of the C.N.R. Rao Committee set up by the Ministry of Human Resource Development on this subject."

The C.N.R. Rao Committee which was set up by the Central Government in January 2005 was supposed submit its recommendations on the entry of foreign univerisities in India by April 15, 2005. A report in The Hindu (June 06, 2005) states that "the Centre was expecting by this month the report of a committee headed by noted scientist C.N.R. Rao on the setting up of foreign universities in the country."

The AICTE web site provides a list of approved foreign institutions that can operate in India and currently there are only two such institutions listed on the AICTE web site.

Here's a summary of AICTE's notification on the procedures and conditions for the entry of foreign universities in India.

Any application to AICTE by a Foreign University / Institution seeking to operate in India either directly or through collaborative arrangement with an Indian University / Institution must be accompanied by a No-Objection Certificate issued by the concerned Embassy in India. The Missions of the concerned Countries shall be required to certify genuineness of the educational institutions of their respective countries willing to offer study programmes in India.

Only such institutions shall be eligible to enter into collaboration/ partnership/twinning arrangements etc. with Foreign Universities/Institutions as are already in existence and are duly approved by the AICTE.  De-novo institutions shall not be eligible.  No franchisee system shall be allowed under these Regulations.

The fee to be charged and the intake in each course to be offered by a Foreign University/ Institution leading to a degree or diploma shall be as prescribed by the AICTE, giving due hearing to the concerned Foreign University/Institution.

Educational innovations including experimentation with different modes of delivery by a Foreign University / Institution shall only be allowed provided such a system is well established either in their parent Country or in India.

The Foreign Universities / Institutions already operating in India in various forms shall have to seek fresh approval from AICTE within six months from the date of issuance of this notification or before commencement of ensuing academic session, whichever is earlier and shall be governed by the Regulations and Guidelines of AICTE.

1.    If a Foreign University / Institution fails to comply with any of the conditions
2.    The AICTE shall also inform the concerned agencies including Ministry of External Affairs, Ministry of Home Affairs, RBI of such decisions and advise these agencies to take any or all of the following measures:

a. Refusal / withdrawal for grant of visa to employees/teachers of the said Foreign University / Institution.
b.    Stop repatriation of funds from India to home Country.
c.    Informing the public about the withdrawal of the Registration of such Foreign University /Institution and the consequences thereof .

Does 2. (b) above imply that foreign universities can repatriate funds out of India if they are complying with all other norms specified by the AICTE? Would this repatriation of funds be termed as repatriation of profits?

Annual Reports : The Foreign University / Institution shall submit an annual report giving details of the number of students admitted, programmes conducted, total fee collected, amount transferred to parent Country, investment made, number of students awarded degree, diploma and any such information that AICTE may ask for.

I hope this Annual Report will be published on the AICTE web site and made available to the public at large. That will go a long way towards fostering accountability and responsibility on the part of the foreign universities and institutions. This same condition must be imposed on all Indian univerisites and institutions as well, whether public or private.

This AICTE notification only covers foreign universities and institutions offering technical and presumably management education in India. I have not found any regulations or policy statements on the letting foreign universities and institutions offering non-technical education including medicine, law, arts, sciences, social sciences etc.

GATS and Higher Education in India - an overview

Rupa Chanda of IIM Bangalore has been studying the implications of GATS for higher education in India. She made a comprehensive presentation on GATS, Higher Education Services and India  (ppt)  at a Higher Education Summit, organized by FICCI in New Delhi on December 2, 2004.. Here're some bits from her presentation - her entire presentation is worth reading.

GATS defines services trade as occurring via four modes of supply all of which are relevant to education

• Mode 1: cross border delivery: delivery of education services via internet (distance education, tele-education, education testing services)
• Mode 2: consumption abroad: movement of students from one country to another for higher education (foreign students in US universities)
• Mode 3: commercial presence: establishment of local branch campuses or subsidiaries by foreign universities in other countries, course offerings by domestic private colleges leading to degrees at foreign universities, twinning arrangements, franchising
• Mode 4: movement of natural persons: temporary movement of teachers, lecturers, and education personnel to provide education services overseas

The main subsectors under the GATS in the area of education are

1. Primary education
2. Secondary education
3. Higher education
4. Post secondary technical and vocational, university degree or equivalent
5. Adult education
6. Other education services

India has received requests (for opening up of services) from several countries (Australia, Brazil, Japan, New Zealand, Norway, Singapore, USA) in education services in the new round of service trade negotiations launched in January 2000 (GATS 2000 round), which mostly focus on higher education, adult education, and other education services. USA also specified training services and educational testing services and Brazil has also requested in primary and secondary education services, while there were no requests from the European Community. All requests to India are for full market access and national treatment commitments in modes 1, 2 and  3. India has not made any offer in education services in the GATS 2000 round due to sensitive public good nature.

It is understandable for the U.S. to want opening up of training and educational testing services, but quite interesting to note that Brazil has requested opening up of primary and secondary education services. I wonder what prompted Brazil to do so.

Rupa Chanda provides a list of India's interests in import and export of educational services.

India's import interests in education services

• Mode 2: Indian students studying in foreign universities (US, UK, Australia)
  
  • Over 40,000 studying in US courses (This is more like 75,000 added per year)
    
  • Several thousand in Europe
• Mode 3: foreign institutions entering India through twinning and franchise arrangements
  
  • Indian students getting foreign degrees, doing professional courses at local branch campuses of foreign institutions in India
  • UK-based Wigan and Leigh College
  • Indian School of Business tieup with Kellogg, Wharton, and London Business School
  • Western International University,Arizona
  • NIIT tieup with ITT Educational Services, USA
  • Tata Infotech tieup with Hertfordshire University, UK
• Mode 1: Prospects for distance education and degrees from foreign academic institutions
• Mode 4: Foreign faculty and scholars teaching in India

India's export interests in education services

• Mode 1: Prospects for tele-education in management and executive training.
  
  • Experience with distance learning, use of new technologies (IGNOU)
  • Education process outsourcing with remote tutoring from India (along the lines of efforts by Career Launcher, Educomp Datamatics etc.)
• Mode 2: Students from developing countries studying in Indian engineering and medical colleges.
  • Around 5,500 students from neighbouring developing countries (2001)
  • Exchange programmes and twinning arrangements
• Mode 3: Setting up of overseas campuses, franchising by Indian institutions
  
  • MAHE, BITS, Central Institute of English and Foreign Languages
  • Over 100 CBSE schools abroad, catering to diaspora
• Mode 4: Indian teachers, lecturers teaching abroad in Middle East, Africa, researchers/scholars on visiting arrangements abroad
  
  • Some 10,000 secondary school teachers overseas
  • Recruitment of Indian teachers in Maths, Science, English
• Potential as a regional hub for exporting higher education services

Writing in The Financial Express (December 14, 2004), Rupa Chanda says

There’s a widespread perception that from January 1, 2005, India is obliged under the WTO to open up its higher education sector to foreign providers and to end public subsidies, with adverse consequences for the quality and affordability of higher education.

But how genuine and well-founded are these concerns? What does GATS oblige India to do in the education sector? What is the experience thus far with foreign education providers in India? If the likely impact is negative, where is the source of the problem?

First and foremost, GATS does not require India to do anything at present in education services.

It’s worth noting that India did not schedule education services either in the Uruguay Round or in its revised commitments under the ongoing Doha Round. Hence, India has no multilateral obligation under the WTO to open up higher education services to foreign participation. Whatever liberalisation has occurred in this area, such as allowing 100% FDI on automatic route and permitting foreign participation through twinning, collaboration, franchising, and subsidiaries, has been autonomously driven. Of course, it’s likely that in future GATS negotiations, India will come under increasing pressure from certain countries to multilaterally bind the liberalisation undertaken thus far in this sector. But it’s unlikely that India will acquiesce to such demands.

The issue then is largely a domestic one. The impact of opening up higher education services is shaped not by the WTO but by domestic factors, including the domestic regulatory framework and the state of the domestic education system in terms of quantity, quality, costs, infrastructure and finances. In this context, evidence suggests that some of the concerns about opening up education services may not be so misplaced.

While there are reputed foreign educational institutions operating, there are numerous less reputed, second or third tier ones as well who charge high fees for programmes of dubious quality. Given India’s capacity constraints in higher education, substandard foreign institutions are able to survive in India. But the problem is not liberalisation per se, but the lack of a supportive domestic regulatory framework, which can ensure that liberalisation is beneficial. This is not to suggest that one should add more layers of regulation in higher education. Already there’s a plethora of regulatory bodies duplicating each other’s functions. What’s required is more effective registration and certification systems, which prevent unapproved institutions from partnering, which protect and inform consumers, enable good quality foreign institutions to enter the Indian market, and which create a level playing field between domestic and foreign institutions so that the former can compete effectively in a liberalised environment. Once such a regulatory framework is in place, India needn’t fear scheduling education services under GATS. It could even inscribe additional conditions on the nature of foreign participation in higher education, something permitted under GATS commitment structure.

She concludes by looking at the opportunity that opens up for India in higher education as a result of the GATS.

Finally, a point often lost on critics is that India also has gone on the offensive in education services. A growing number of Indian educational institutions are beginning to export to other markets. So, globalisation of education services should also be seen as an opportunity, and the GATS as a framework to exploit this opportunity. In short, a pro-active rather than defensive approach is required to benefit from the liberalisation of higher education services, both unilaterally and multilaterally, on the import as well as export fronts.

Prof. Manoj Pant of JNU, writing in The Financial Express (May 28, 2005), provides more background on the options open to India in formulating its strategy for opening up of educational services under the GATS and echoes Rupa Chanda's thoughts on the need to protect and inform consumers' (students) about the quality of the various foreign service providers and enable them to verify their claims.

Having missed the March deadline for submissions under GATS, countries will have to make their submissions now by the end of May. One area in which India, too, will make submissions is educational services which includes higher education. While it is still not clear (at the time of writing) what the India offer is likely to be, it is important to understand how the post- WTO scenario preparedness differs in the case of services compared with submissions under Gatt. I will look at this issue specifically from the point of view of trade in educational services.

The main contention is likely to be the opening up of higher education under GATS. While India could offer only distance education and some professional educational services under the positive list approach, it is important to understand what the subsequent preparedness involves.

A perusal of newspapers may give the impression that higher education is already open to foreign service providers. This is not true. However, the reality is even more alarming. For, any provider of educational services who does not want UGC/AICTE recognition is free to enter any educational service without any regulation. What is more alarming is the lack of any forum where consumers can verify the claims of the multitude of service providers who promise all sorts of benefits to students. Many even offer unverifiable links to foreign institutions. Hence, the first task of the government must be to set up a regulator in the field of educational services. Only then can appropriate legislation be framed to protect consumers.

The second issue in the case of services is regarding foreign service providers. Unlike trade in commodities, the question of FDI in services is built into specification of the mode of delivery of services. In the case of educational services, the issue is whether, and with what restrictions, India would allow the FDI mode of entry of foreign providers (Mode 3).

The primary problem today is the inability of the university system to provide higher education to all who aspire for it. There is no political commitment of public funds and the quality of education in some universities is below par, to say the least. This is the slack that the unregulated private sector is taking up today at considerable cost to students. Should private foreign funds be allowed to compete in higher education? Should we allow this competition?

It is my own suspicion that, if higher education is opened up even in a limited way, the principal opposition to FDI is likely to come from the private sector. Finally, India’s submissions on educational service must also be seen in the context of bargaining strategies at the WTO—to win some you might need to lose some. This is particularly important in the context of known developing country positions on Mode 4  (movement of natural persons and the GATS visa) and India’s own efforts to keep markets open for its IT services.

One of the most aggressive demanders of opening up of trade in educational services, the US, is also the one trying to firm up its domestic legislation to restrict outsourcing of services by its domestic companies. While Indian negotiators have probably taken most of these issues into consideration in finalising their submissions on trade in services, one wonders if there is any move to undertake changes in domestic legislation necessary to meet the challenges of a post-WTO world. One hopes that the lessons of the Uruguay Round have finally been learnt.

As described in an earlier posts, the Government must mandate that every educational institution operating in India, whether Indian or foriegn, public or private, to

• publish an annual report with details of the infrastructure available, the staff, the fees charged, the number of students, the results of the examinations, the amount of funds available to the institution and the sources of funding, affiliation to any foreign bodies with details of those bodies etc.
• be rated by independent rating agencies like CRISIL, ICRA or CARE and publicly announce their rating

This will enable consumers (students) to be fully informed about the educational institutions and help them make their choices.

P.S.   G. Srinivasan, writing in The Hindu (May 30, 2005), reviews India's options in the GATS negotiations in the run-up to revised submissions before the deadline of May 31, 2005, and a Commerce Ministry press release dated May 30, 2005 states

India will be making its Revised Offers shortly in sectors which include those in which commitments were made in the Uruguay Round or in which Initial Offers were made in the ongoing Doha Round of WTO negotiations. The sectors thus covered include business services, construction and related engineering services, health related and social services, tourism and travel related services, maritime services and transport services.

There is surprisingly no mention of education services. Presumably the deadline for revised submissions on education services is still farther away.

Stanford University keen to set shop in India

The Statesman (April 03, 2005) reports,

Stanford University, one of the most prestigious American universities, is considering opening a campus in India. But the current rules, which allow private universities with foreign ownership, never mind their pedigree — do not allow Stanford to do so. Foreign money can be spent on a university but a university abroad cannot open a branch here.

A top government official said Stanford University officials were in India recently to consider the possibility of opening a campus here. There were a number of high-level meetings and also a dinner for the president, Dr John L Hennessy, hosted by MP Mr Jyotiraditya Scindia, a Stanford alumnus.

If Stanford did come here, it would not be another of the bucket-shop private universities that charge a hefty amount for a so-called foreign degree, though from India. Instead, the university, the official said, would be considering moving certain courses out of Stanford to India if they were relevant here. For instance, Indian or South Asian history could be taught here as also, a course on the economics of developing countries. “It makes a lot of sense to teach these courses here. Those who will study here will be those who will be admitted there (there may be no direct admissions here) and sent here. India is one of the possibilities. They are thinking of a campus in China or Singapore as well,” the official said. Stanford already has a campus in England, near Oxford.

How is China dealing with the entry of foreign universities into the country?

World Education News & Reviews (July/August 2004) reports

The recent accession of China to the World Trade Organization and the increasingly favorable official view taken of in-country activity by foreign education institutions (new regulations came into force in September 2003), suggest a genuine opening up of the market.

From the Chinese perspective, the major benefits of foreign involvement are capacity, status, and innovation. China is rapidly becoming the most significant source of students studying abroad (sending over 63,000 students to the United States alone in 2002). However, like some other major source countries such as Malaysia and Singapore, China may come to view foreign-sourced, in-country provision as more cost-effective (in terms of reducing travel costs and stemming brain drain).

The third and most recent piece of legislation on transnational provision was released in March 2003 and offers clarification on the prior 1995 regulations. (Both the 1995 and 2003 regulations are available in English on the Ministry of Education website). Major features include the stipulation that

• foreign institutions must partner with Chinese institutions;
• partnerships must not seek profit as their objective;
• no less than half the members of the governing body of the institution must be Chinese citizens and the post of president or the equivalent must be a Chinese citizen residing in China;
• the basic language of instruction should be Chinese; and
• tuition fees may not be raised without approval.

The sustained proscription of foreign education institutions making a profit in China is in contrast to the 2002 law on domestic private higher education, which permits a "reasonable return."

It would appear that no Chinese private higher education institution has yet won approval to offer programs leading to foreign degrees, so the combination of a for-profit domestic provider and a foreign provider has yet to materialize, at least at degree level. Indeed, I am not aware of any foreign for-profit higher education institution currently operating independently in China at the bachelor’s degree level or above. Known examples of other foreign for-profit education activity include IT education firms such as India’s NITT and brokers such as CIBT. Canadian CIBT acts as a local partner for some U.S. for-profit institutions, such as Western International University (owned by the Apollo Group) and ITT Educational Services

The full text of the Regulations of the People's Republic of China on Chinese-Foreign Cooperation in Running Schools (promulgated by the State Council in March 2003) is available on the Chinese Ministry of Education web site. Apparently the State Council also promulgated in June 2004 a set of Implementation Measures for the Regulations on Chinese-Foreign Cooperation in Running Schools (2004), but I have not been able to find these online as yet.

Government sets up committee to recommend policy on entry of foreign universities into India

Education Ministers of 25 States deliberated for two days (January 10-11, 2005) in Bangalore and one of the issues discussed was the entry of foreign universities into India.

According to a report in The Hindu (January 12, 2005)

In a clear indication of the Government moving towards permitting foreign universities to set up their establishments in India, the Union Minister for Human Resource Development, Mr Arjun Singh, on Tuesday announced the setting up of a high level committee under the Chairmanship of the eminent scientist, Dr C. N. R. Rao. The Committee consisting of six members, including Dr Rao, has been asked to submit its recommendations by April 15. The decision comes in the wake of India having to take a decision on General Agreement on Trade in Services (GATS) sooner.

Apart from Dr Rao, the member committee will consist of Mr Bakul Dholakia, Director, IIM Ahmedabad, Mr H. P. Dikshit, Vice-Chancellor, Indira Gandhi National Open University, Mr C. P. Chandrasekhr of Jawaharlal, Nehru University, Delhi, Mr Ashok Misra, Director of IIT, Mumbai and Mr Mulchand Sharma, Director, National School of Law University, Bhopal.

The Government will await the committee's recommendation and discuss the draft proposal before moving towards a Central legislation. Addressing a press meet here at the end of the two-day Conference of State Ministers of Higher and Technical Education, Mr Singh said that based on the consensus arrived at during the conference, a draft Central legislation would be framed by Parliament to regulate the admission procedures to the professional courses in the States. Though he did not specify any time frame, Mr Singh however ruled out an Ordinance to tackle the contentious issue during the next academic session in May.

"I would prefer not to go through the Ordinance route. Parliament has to be kept informed about the issue," he said, adding that he hoped a draft Bill could be prepared before the academic session after consultation with all the States. However, on the setting up of private universities, no consensus was reached and while some States welcome it, others felt "we have already gone overboard."

Later, the education ministers of BJP-ruled States told reporters that though they welcomed the proposal to permit foreign universities, they had spelt out their conditions for supporting it. Mr Ghanshyam Tiwari, Rajasthan, who briefed reporters on behalf of the BJP-ruled States — Rajasthan, Madhya Pradesh, Gujarat and Goa — said that the Government should allow foreign universities only on a 50:50 partnership with local institutions. Besides, the foreign investors should be permitted to retain only 20 per cent of the profits, while the remaining portion should be reinvested within the country. No repatriation of the capital should be allowed. Mr Tiwari added that such universities should be bound by the Indian regulatory bodies in education like the University Grants Commission and the All India Council of Technical Education.

The CNR Rao committee should be announcing its recommendations tomorrow.

The CPI (M) which is one of the influential constituents of the United Progressive Alliance, the current ruling coalition has expressed its views against  privatisation of education and the entry of foreign universities into India and argues for more Government funding of education through budgetary support.

But the Government simply does not have the money to cope with the looming funding crisis in higher education or achieving their  target of annual spending of 6% of GDP on education.